Definition

An Australian Financial Services (AFS) licence is a regulatory authorisation granted by the Australian Securities and Investments Commission (ASIC) to organisations that provide financial services in Australia. 

What is an AFS licence?

An AFS licence is a key requirement for businesses or individuals who offer financial services to clients, including investment advice, dealing in financial products, and providing financial planning services.

Organisations holding an AFS licence are subject to ongoing regulatory obligations, including:

• Compliance requirements: They must comply with the laws and regulations governing the provision of financial services.
• Client protection: They have a duty to act in the best interests of their clients and provide services that are appropriate to their needs and objectives. 
• Financial reporting: They must maintain accurate financial records and submit periodic reports to ASIC, detailing their financial position and compliance with regulatory requirements.
• Professional conduct: They must uphold high standards of professional conduct and integrity in their dealings with clients, employees, and other stakeholders.
• Risk management: They are required to implement effective risk management systems to identify, assess, and reduce risks associated with their financial services activities.

Organisations found to be in breach of their AFS licence obligations may face sanctions, including fines, licence suspension, or cancellation, depending on the severity of the non-compliance.

Example of an AFS licence

Imagine Sarah wants to start a financial advisory firm in Australia. Before she can offer her services to clients, she needs to obtain an AFS licence. She submits her application to ASIC, providing details about her qualifications, business plan, compliance procedures, and financial resources.

After a thorough assessment, ASIC grants Sarah an AFS licence, indicating that she meets the regulatory standards and is authorised to provide financial advice and deal in financial products to clients in Australia. Sarah can now legally operate her financial advisory firm, providing services to her clients while adhering to the regulations.